EV Tax Credits to Spur More Vehicle Sales Are Entering a Critical Phase
Auto industry pushes Treasury Department to write rules that clearly spell out how electric vehicles can fully qualify, with as much flexibility as a new law allows
3 min
The US government is pressing to complete new rules on tax breaks for electric-vehicle purchases by an end-of-year deadline as auto companies seek guidelines that help qualify as many vehicles as possible.
The Treasury Department is leading the effort after the August signing of a law that extended an existing $7,500 tax credit through 2032. The EV plan, included in Democrats’ climate, health and tax-policy package known as the Inflation Reduction Act, included new requirements for U.S. battery sourcing that auto makers have warned will make it difficult for models available today to be eligible.
The changes to the EV tax credits come amid sharp price increases for new vehicles. New-vehicle prices were up 10.1% in August from a year earlier, according to the Labor Department, outpacing the overall annual inflation rate of 8.3%. The average electric-vehicle price is more than $60,000.
EV sales have tripled in the past two years but still account for just 6% of U.S. vehicle sales. Auto companies are pushing to develop and sell more models with goals to greatly increase the percentage of EVs manufactured and sold.
The tax credits are intended to spur electric-vehicle sales and encourage the auto industry to shore up domestic supply chains for materials needed to manufacture EVs. The Biden administration and Democrats see speeding up the pace of U.S.-based production and purchases of electric vehicles as important parts of their broader push to lower greenhouse-gas emissions and address climate change.
The Treasury Department, in its regulatory guidance for the credits, could help make the new requirements easier for auto makers to meet, industry and advocacy groups said. Issues the groups would like to see addressed include how the government calculates whether the sourcing requirements have been met and how auto makers will certify they are in compliance. By law, Treasury must issue guidance for the new requirements by Dec. 31.
Starting in 2023, the law imposes two requirements for an electric vehicle to be eligible for the full tax credit. First, at least 40% of the value of crucial battery minerals such as lithium and nickel must have been extracted or processed in the U.S. or in countries with which the U.S. has a free-trade agreement, or have been recycled in North America. Second, at least 50% of the value of the vehicle’s battery components must have been manufactured or assembled in North America. The percentage thresholds increase in subsequent years.
Dan Bowerson, a senior director at the Alliance for Automotive Innovation, a trade group whose members include several auto makers, said Treasury should issue streamlined guidelines so that auto makers can easily understand the rules as they plan how to meet the requirements.
“We’re going to be pushing for the guidance to be as clear as possible, so that everyone is looking at the same thing,” Mr. Bowerson said. “We don’t want one manufacturer to say, ‘We’re taking the percentage value of the battery components to mean this,’ while the others take it to mean that.”
Tom West, deputy assistant secretary for tax policy at the Treasury Department, said the agency is trying to determine what discretion it has in writing the rules. It is collaborating with other agencies, such as the Energy Department and the Environmental Protection Agency, to understand issues that fall outside of the department’s expertise. He said Treasury is also working to define what constitutes a free-trade agreement for the purposes of tax issues, given the critical-minerals requirements.
“It is a significant challenge, but it is a challenge we are eager to take on because this legislation is something that we’ve been fighting to get for a generation,” Mr. West said about writing the rules.
Auto manufacturers likely will find it challenging to comply with the new rules immediately. The industry has historically been reliant on China and other countries for EV batteries and the processing of minerals that go into them.
Industry and advocacy groups said Treasury should also issue guidance on requirements that go into effect in 2024 and 2025 that make EVs ineligible for the tax credit if they have batteries or critical minerals in batteries that are sourced from a so-called foreign entity of concern, such as China.
“That’s an element of this that needs clarification for sure,” said Genevieve Cullen, president at the trade group Electric Drive Transportation Association. She said members of her group have questions on how the rules would apply when companies are based outside of countries such as China, but have subsidiaries with related EV operations there.
The Alliance for Automotive Innovation has said it would take several years for any EVs now available for purchase in the U.S. to qualify for the full credit, given the new sourcing requirements.
Abigail Wulf, of the Washington-based advocacy group Securing America’s Future Energy, said another question is how Treasury will set calculations for the critical-minerals requirement, because the value of a mineral changes from when it is mined compared with when it is processed. She also said industry likely could meet the battery-component requirements more quickly if the guidance emphasized the manufacturing or assembly location for battery packs—rather than the location of production of battery cells—because many auto makers were just now beginning to increase their domestic facilities for the latter.
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Terrible commutes. Expensive child care. Employees explain why they will keep working from home.
4 min
What’s still keeping American workers out of the office?
At a time when restaurants, planes and concert arenas are packed to the rafters, office buildings remain half full. Thinly populated cubicles and hallways are straining downtown economies and, bosses say, fragmenting corporate cultures as workers lose a sense of engagement.
Yet workers say high costs, caregiving duties, long commutes and days still scheduled full of Zooms are keeping them at home at least part of the time, along with a lingering sense that they’re able to do their jobs competently from anywhere. More than a dozen workers interviewed by The Wall Street Journal say they can’t envision returning to a five-day office routine, even if they’re missing career development or winding up on the company layoff list.
Managers say they will renew the push to get employees back into offices later this year. The share of companies planning to keep office attendance voluntary, rather than mandatory, is dropping, according to a survey released in May of more than 200 corporate real-estate executives conducted by property-services firm CBRE, one of the largest managers of U.S. office space.
A battle of wills could be ahead. The gap between what employees and bosses want remains wide, with bosses expecting in-person collaboration and workers loath to forgo flexibility, according to monthly surveys of worker sentiment maintained by Nicholas Bloom, a Stanford University economist who studies remote work.
Escalating expenses
One reason workers say they’re reluctant to return is money. Some who have lost remote-work privileges said they are spending hundreds, or in some cases thousands, of dollars each month on meals, commutes and child care.
One supercommuter who treks to her Manhattan job from her home in Philadelphia negotiated a two-day-a-week limit to her New York office time this year. Otherwise, she said she could easily spend $10,000 a year on Amtrak tickets if she commuted five days a week.
Christos Berger, a 25-year-old mortgage-loan assistant who lives outside Washington, D.C., estimates she spends $2,100 on child care and $450 on gas monthly now that she is working up to three days a week in the office.
Berger and her husband juggled parenting duties when they were fully remote. The cost of office life has her contemplating a big ask: clearance to work from home full time.
“Companies are pushing you to be available at night, be available on weekends,” she said, adding that she feels employers aren’t taking into account parents’ need for family time.
Rachel Cottam, a 31-year-old head of content for a tech company, works full time from her home near Salt Lake City, making the occasional out-of-town trip to headquarters. She used to be a high-school teacher, spending weekdays in the classroom. Back then, she and her husband spent $100 a week on child care and $70 a week on gas. Now they save that money. She even let her car insurance company know she no longer commutes and they knocked $5 a month off the bill.
Friends who have been recalled to offices tell Cottam about the added cost of coffee, lunch and beauty supplies. They also talk about the emotional cost they feel from losing work flexibility.
“For them, it feels like this great ‘future of work’ they’ve been gifted is suddenly ripped away,” she said.
Parent trade-offs
If pandemic-era flexible schedules go away, a huge number of parents will drop out of the workforce, workers say.
When Meghan Skornia, a 36-year-old urban planner and married mother of an 18-month-old son, was looking for a new job last year, she weeded out job openings with strict in-office policies. Were she given such mandates, she said, she would consider becoming an independent consultant.
The firm in Portland, Ore., where Skornia now works requests one day a week in the office, but doesn’t dictate which day. The arrangement lets her spend time with her son and juggle her job duties, she said. “If I were in the office five days a week, I wouldn’t really ever see my son, except for weekends.”
Emotional labor
For some, coming into the office means donning a mask to fit in.
Kenneth Thomas, 42, said he left his investment-firm job in the summer of 2021 when the company insisted that workers return to the office full time. Thomas, who describes himself as a 6-foot-2 Black man, said managing how he was perceived—not slipping into slang or inadvertently appearing threatening through body language—made the office workday exhausting. He said that other professionals of colour have told him they feel similarly isolated at work.
“When I was working from home, it freed up so much of my mental bandwidth,” he said. His current job, treasurer of a green-energy company, allows him to work remotely two or three days a week.
Lost productivity
The longer the commute, the less likely workers are to return to offices.
Ryan Koch, a Berkeley, Calif., resident, went to his San Francisco office two days a week as required late last year, but then he let his attendance slide, because commuting to an office felt pointless. “I’m doing the same video calls that I can be doing at home,” he said.
Koch, who works in sales, said his nonattendance wasn’t noted so long as his numbers were good. When Koch and other colleagues were unable to meet sales quotas in recent weeks, they were laid off. Ignoring the in-office requirement probably didn’t help, he said, adding he hopes to land a new hybrid role where he goes in one or two days.
Jess Goodwin, a 36-year-old media-marketing professional, turned down an offer to go from freelance to full time earlier this year because the role required office time and no change in pay.
Goodwin said a manager “made it really clear that this is what they’re mandating right now and it could change in the future to ‘you have to be back in five days a week.’”
Goodwin, who lives in Brooklyn, N.Y., calculated that subway commutes to Midtown Manhattan would consume more than 150 hours annually, in addition to time spent getting ready for work.
Goodwin’s holding out for a better offer. She said she would consider a hybrid position if it came with a generous package and good commute, adding: “And I would also probably need something in my contract being like, ‘We’re not going to increase the number of days you have to come in.’”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
